JT Inc. purchased 67,000 pounds (cost = $616,400) of direct material to be used in the manufacture
Question:
JT Inc. purchased 67,000 pounds (cost = $616,400) of direct material to be used in the manufacture of the company's only product. According to the production specifications, each completed unit requires four pounds of direct material at a standard cost of $9 per pound. Direct materials consumed by the end of the period totaled 65,500 pounds in the manufacture of 16,050 finished units.
An examination of JT Inc. payroll records revealed that the company worked 42,000 labor hours (cost = $621,600) during the period, and specifications called for each completed unit requiring 2.6 hours of labor at a standard cost of $15 per hour.
Use the information to compute the following variances:
Calculate the direct-material price and quantity variances, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.